CLARITY Act Reshapes Stablecoin Yield Economics

Original Author: @BlazingKevin_, Blockbooster Researcher

On May 14, 2026, the U.S. Senate Banking Committee passed the CLARITY Act with a bipartisan vote of 15-9.

The most important content in this "legislative progress" is Section 404 of the bill text. This section, redrafted by Senators Thom Tillis and Angela Alsobrooks in a compromise text released on May 1, accomplishes two things the GENIUS Act did not:

First, it extends the stablecoin yield ban to all Digital Asset Service Providers (DASPs) and their affiliates — including centralized exchanges, brokers, dealers, and custodians. When the GENIUS Act was signed in July 2025, it only restricted "stablecoin issuers" (PPSI/FPSI). The compliant workarounds used by Coinbase, Anchorage Digital Neo Ltd., etc., which continued providing 3.5%-5% yields to users through a "non-issuer interest payment" path, are all shut down by Section 404.

Second, it explicitly introduces a legal dichotomy of "passive yield vs. activity-based rewards." Section 404 prohibits rewards that are "functionally or economically equivalent to bank deposit interest" — i.e., yield that accrues automatically based solely on holding — but preserves rewards "based on real activity or transactions," such as staking, market making, credit card cashback, and merchant transaction rewards.

Together, these two changes constitute a paradigm shift. The stablecoin industry is moving from a market of "hold-to-earn" to a market of "use-to-earn."

Meanwhile, over the past month, three of Wall Street's largest asset managers (Morgan Stanley, BlackRock, JPMorgan) have almost simultaneously launched money market fund products tailored for stablecoin reserve needs. Morgan Stanley's MSNXX was established on April 16 and publicly announced on April 23; BlackRock filed for two tokenized funds, BSTBL and BRSRV, on May 8; JPMorgan filed for JLTXX on May 12. Within 28 days, these three firms launched products with highly similar functional positioning.

This timing is certainly not a coincidence. We believe: The expectation that CLARITY Section 404 will soon pass is pushing the stablecoin yield economy into a new paradigm — the hold-to-earn path is being narrowed, the use-to-earn path is being preserved, and tokenized money market funds, as compliant yield-bearing tools for stablecoin reserves, become the most resiliently benefiting compliant yield layer in this new paradigm.

The products filed en masse by Wall Street asset management giants in April-May represent an industrial positioning for this paradigm shift. To be clear: CLARITY has only passed the Senate Banking Committee and still has a way to go before presidential signature, but market expectations are already reorganizing in this direction.

This article starts with a timeline reconstruction, deconstructs the relay legal structure of GENIUS and CLARITY, and analyzes why the tokenized reserve asset layer becomes the most resilient compliant yield channel in the new paradigm.

1. The 30-Day Industry Positioning

1.1 April 16: Morgan Stanley's Opening Move

Let's go back to the earliest event first.

On April 16, 2026, Morgan Stanley's Stablecoin Reserves Portfolio (ticker: MSNXX) was officially established.

On April 23, MSIM publicly announced the product.

The positioning of MSNXX is very precise. The official statement reads: "This fund offers a qualified money market fund option for compliant stablecoin issuers, enabling them to invest in the reserve assets needed to back their stablecoins in circulation."

MSNXX is a product tailored for reserve asset requirements — it invests in cash, U.S. Treasury bills with maturities of 93 days or less, and overnight repurchase agreements collateralized by Treasuries.

However, MSNXX is not a tokenized product and does not trade on-chain. Morgan Stanley's product strategy is conservative — it offers only a traditional MMF wrapper, allowing stablecoin issuers to invest through traditional financial channels.

This is the first publicly announced product "designed specifically for stablecoin reserve needs" from a Wall Street asset management giant. It is not revolutionary in itself, but it sends a clear signal: stablecoin reserve demand has become large enough for asset managers to create a dedicated fund for it.

1.2 May 8: BlackRock's "Dual Filing"

Twenty-two days later, BlackRock simultaneously submitted two registration statements to the SEC: the tokenized version of the BlackRock Select Treasury Based Liquidity Fund (BSTBL) and the BlackRock Daily Reinvestment Stablecoin Reserve Vehicle (BRSRV).

The design of these two products contrasts sharply with MSNXX. BSTBL is a tokenized version of BlackRock's existing Select Treasury-Based Liquidity Fund. It serves traditional institutional cash managers — clients already invested in this fund, now with an additional on-chain distribution channel.

BRSRV is a newly created tokenized money market fund, distributed across multiple chains by Securitize, targeting a single client group: stablecoin issuers.

The key difference between BlackRock and Morgan Stanley lies in tokenization. BlackRock chooses to issue the same assets (short-term Treasuries + cash + overnight repos) on-chain to stablecoin issuers, making the reserve assets themselves possess on-chain composability, 24/7 transferability, and the potential for integration with DeFi protocols. This is a product form tailor-made for crypto-native clients (e.g., Ethena, Jupiter).

The BSTBL + BRSRV filing expands BlackRock's existing product matrix, extending tokenization infrastructure from BUIDL's "DeFi collateral" use case to BRSRV's "stablecoin reserve asset" use case.

1.3 May 12: JPMorgan's Second Entry

Four days later, JPMorgan filed the JPMorgan OnChain Liquidity-Token Money Market Fund (JLTXX) with the SEC.

The fund itself invests in U.S. Treasuries and overnight repo agreements collateralized by Treasuries or cash, with underlying assets identical to BUIDL, BSTBL, and BRSRV. The Token Class Shares are dated May 13.

JLTXX is not JPMorgan's first on-chain MMF. As early as December 15, 2025, JPMorgan Asset Management had already launched My OnChain Net Yield Fund (MONY) on Ethereum. MONY is a 506(c) private fund, open only to qualified investors.

This means JPMorgan has had nearly 5 months of operational experience in the tokenized MMF track. JLTXX is not a catch-up product but the second step in JPMorgan's on-chain MMF strategy — expanding a product previously limited to 506(c) qualified investors into a registered fund available to a broader client base, specifically targeting the stablecoin reserve use case.

On one hand, JPMorgan, alongside Bank of America, Wells Fargo, and Citigroup, explored issuing a joint syndicated stablecoin in 2025; on the other, it deeply lays out its position in the tokenized reserve asset track through the MONY → JLTXX product matrix. Regardless of the OCC's final ruling, JPMorgan has a product in place — this "hedging bets" approach reflects JPMorgan's unique strategic space as a GSIB bank and asset management company.

1.4 May 14: The CLARITY Act Validates the Entire Track

On May 14, the Senate Banking Committee passed the CLARITY Act with a 15-9 bipartisan vote.

It's worth noting: Morgan Stanley's MSNXX, BlackRock's BSTBL/BRSRV, and JPMorgan's JLTXX — these products were all prepared before the CLARITY Section 404 compromise text was made public.

In fact, since CLARITY was first shelved in January 2026, the asset management industry has been clear about two things: First, the "hold-to-earn" stablecoin reward path would eventually be closed. Second, stablecoin reserve assets must exist, must be compliant, and must inevitably yield returns.

Combine these two points: When the hold-to-earn path is narrowed, one of the most resilient "indirect yield" transmission paths is through the reserve asset layer — the stablecoin issuer itself does not pay yield, but its reserve's tokenized money market fund legally pays yield to the issuer, who then decides how to pass this yield to users within a compliant framework.

The asset management giants' products are the infrastructure prepared for this "most resilient compliant yield channel."

2. Why CLARITY is Much More Important Than GENIUS

2.1 The Limited Scope of the GENIUS Act

To understand the paradigm-shifting effect of Section 404, one must first precisely understand what it expands upon — GENIUS Act 4(a)(11).

The GENIUS Act, signed into law in July 2025, stipulates that compliant stablecoin issuers or foreign stablecoin issuers shall not pay any form of interest or yield to stablecoin holders.

That is, the GENIUS Act itself does not distinguish between "passive yield" and "activity-based rewards"; all forms of interest or yield paid by the issuer to the holder are completely prohibited.

Second, its subject of restriction is only the issuer itself, not third parties like exchanges, wallets, custodians, or affiliates.

This second limitation created a regulatory loophole — known in the industry as "pass-through evasion." The entire stablecoin industry in 2025-2026 essentially operated within this loophole, seeking compliant innovation space:

• Coinbase / Kraken Model: Exchanges distribute rewards. USDC is issued by Circle, but Coinbase provides approximately 4% rewards to USDC holders through its Coinbase One subscription model.
• Gemini Credit Card Model: Rewards triggered through external merchant transactions. GUSD is issued by Gemini Trust Company, but Gemini credit card holders receive GUSD cashback when spending at merchants.
• Anchorage Digital Neo Model: Rewards paid through an independent affiliated legal entity. USDtb is issued by Anchorage Digital Bank, but Anchorage Digital Neo Ltd. (a separate legal entity) pays the rewards.

These three models together formed the "indirect interest-paying" ecosystem of the GENIUS era.

But the entire compliance basis for this was the limited scope of the GENIUS Act, which restricted only the issuer.

2.2 The Substantial Expansion of CLARITY Section 404

CLARITY Act Section 404 does two things the GENIUS Act did not.

First: Expansion to DASPs and Affiliates

Section 404's subject of restriction is no longer limited to stablecoin issuers, but expands to "covered digital asset service providers and their affiliates." This scope explicitly covers centralized exchanges, brokers, dealers, and custodians.

This expansion immediately closes the compliant paths used by Coinbase, Kraken, Gemini, Anchorage Digital Neo, etc., which relied on "non-issuer interest payments." Coinbase, as a DASP, can no longer distribute hold-only USDC rewards; Anchorage Digital Neo can no longer pay USDtb rewards.

Second: Introducing the "Passive vs. Active" Dichotomy

Section 404 prohibits DASPs from providing rewards "functionally or economically equivalent to bank deposit interest" but preserves rewards "based on real activity or transactions."

This means any rewards tied to "consumption, trading, staking, or transfer" can survive, while any rewards that grow linearly with idle balances cannot.

Together, these two actions constitute a complete paradigm shift. All "indirect interest-paying" templates from the GENIUS era are either closed or require redesign in the CLARITY era.

The stablecoin industry is moving from a market of "hold-to-earn" to a market of "use-to-earn."

2.3 The Paths to Victory in the Paradigm Shift

In the use-to-earn paradigm, there are three possible paths to transmit yield to users.

Path A: Redesign Rewards as Activity-Based Rewards

Applicable to: Exchanges, wallets, credit cards. Coinbase might change USDC rewards from "hold to earn" to "based on trading frequency / spending amount." Gemini is already using the credit card cashback model.

The key issue with Path A is not whether it can retain users, but its design cost — Coinbase would need to restructure the entire legal framework and product UI of its reward system, and each active design would need to pass the SEC/CFTC's factual test. This restructuring could take 6-12 months, with user churn being a real risk during that period. However, in the medium term, Path A could potentially recover and even surpass the appeal of the hold-to-earn era.

Path B: Keep Yield at the Protocol Layer, Pass to Users via Activity-Based Operations

Applicable to: DeFi protocols. Section 404's definition of "covered digital asset service provider" is clearly built around centralized intermediaries — yield generated by non-custodial smart contracts, such as supplying USDC to Aave for variable rate lending, falls outside this definition by design.

This means users depositing USDC into Aave's lending pool to earn variable interest is considered compliant under most legal scholars' current interpretations — CLARITY seems to unexpectedly leave a yield channel for non-custodial DeFi.

However, this exemption carries significant uncertainty. If final rules extend the "economically equivalent" concept to non-custodial DeFi, or define DeFi frontends as affiliates, the exemption for Path B could be substantially narrowed.

Path C: Pay Yield Through the Reserve Asset Layer

This is the path Wall Street asset managers are betting on. The specific mechanism: The stablecoin issuer itself does not pay yield, DASPs do not pay yield, but the stablecoin's reserve assets are tokenized money market funds that legally pay yield to their holders (i.e., the stablecoin issuer). The stablecoin issuer, upon receiving the fund's distributed yield, retains it as company profit — or partially passes it to users by designing active behavior rewards.

The key compliance advantage of this path: Its yield layer is not at the stablecoin layer, nor at the DASP layer, but at the underlying fund layer — unrelated to the stablecoin regulatory framework.

These three paths are not mutually exclusive but will evolve simultaneously.

Path A may find new life in the hands of players like Coinbase, which have retail brands and distribution channels;

Path B might receive an unexpected boost for protocols like Aave and Pendle (accompanied by tail risk of regulatory tightening in the next 12 months);

Path C is the path least directly threatened by Section 404, but requires the OCC's 20% cap not being adopted as a prerequisite.

Path C is the "most resiliently benefiting" compliant yield layer, but not the "only" one.

This is why Wall Street asset management giants filed for tokenized money market funds in April-May. They are providing one piece of compliant yield infrastructure for the use-to-earn paradigm about to be solidified by CLARITY Section 404. Considering the implementation costs and regulatory uncertainties of Paths A and B, Path C has the strongest risk-adjusted appeal — this is BlackRock's industry judgment.

2.4 The Collaborative Relationship Between Path B and Path C

There seems to be collaborative potential between Path B and Path C. A complete on-chain yield system could utilize both paths simultaneously:

• Use BUIDL at the reserve asset layer — ensuring a source of compliant yield
• Use Aave lending or Pendle yield splitting at the user layer — ensuring users perceive the "yield" as coming from active operations

This two-layer structure of "BUIDL at the base, DeFi protocols at the surface" could theoretically build a use-to-earn system that is both compliant and user-friendly. When BlackRock launched BUIDL, it clearly did not specifically foresee Section 404, but this product happens to become the optimal base layer for the use-to-earn system in the new paradigm.

3. BlackRock's Three-Layer Product Matrix — Infrastructure for the New Paradigm

3.1 Three Products, Three Client Groups

To understand BlackRock's strategy, one must place its three tokenized fund products side-by-side for comparison:

BUIDL: Launched in March 2024, natively built on Ethereum. Legal structure is a BVI fund, with custody provided by Securitize.

Target Clients: